Schiff vs. Ritholtz: Political Correctness vs. Law of Supply and Demand

Jon Stewart's Daily Show mocked Schiff in an amusing video interview Wage Against the Machine. The video allegedly explores "the devastating economic effects of raising the minimum wage to the poverty level."

I am no fan of Schiff. We have radically different views on the inflation-deflation debate. And I do find the way he stated his case to be very distasteful.

That said, it's clear the Daily Show was out to score political points, not explore economic reality.

Given that Schiff was purposely displayed in the worst light possible and Ritholtz the best light possible (Ritholtz admits retake after retake) it is not shocking in the least to see all this blowback.

Merits of the Debate

Political correctness or not, I want a sound discussion of economic principles.

Indeed, let's hope that remains a fantasy because it's already proven if you give things away free, people able to work, will stop working.

Here's an important corollary: If you make people work, you end up with work that has no economic justification.

Campaign for a Bigger Paycheck

On January 2, in The Campaign for a Bigger Paycheck, a New York Times stated 'When you raise the price of employment, guess what happens? You get less of it,' said Speaker John Boehner, espousing a party-line theory that most economists agree has been discredited.

Someone Please Help New York Times With Econ 101

Actually, it's the New York Times editorial board that's discredited.

Caroline Baum, in one of her last articles at Bloomberg (she has gone on to other things and I wish her well), blasted that New York Times "discredited" fiction sky high.

This is one of the more outrageous political statements dressed up as economic theory from the editorial board of the New York Times. They should be ashamed of themselves.

If you learned anything from your Econ 101 class in college, hopefully it was the law of supply and demand. Lowering/raising the price of a good or service increases/decreases the quantity demanded. Similarly, producing less/more of something will raise/lower the price.

Isn't it about time opinion writers stopped using economics to justify a moral issue? Our hearts go out to those who can't earn a decent living, find a job, get laid off for no good reason or find themselves in harm's way. If we, as a society, want to provide support to those in need, fine. But the paper of record does a disservice when it makes wild, unsubstantiated claims about basic principles of economics.

Theory vs. Practice

Caroline Baum stated economic theory to perfection.

Let's now look at the economic law of supply and demand in practice as opposed to a biased political correctness in the way things were stated.

Yesterday, in the wake of Tuesday’s State of the Union address, I poured cold water on President Obama’s claim that a hike in the minimum wage for federal contract workers would benefit the United States’ economy, pointing specifically to unemployment rates in the European Union. The data never lie: EU countries with minimum wage laws suffer higher rates of unemployment than those that do not mandate minimum wages. This point is even more pronounced when we look at rates of unemployment among the EU’s youth – defined as those younger than 25 years of age.

In the twenty-one EU countries where there are minimum wage laws, 27.7% of the youth demographic – more than one in four young adults – was unemployed in 2012. This is considerably higher than the youth unemployment rate in the seven EU countries without minimum wage laws – 19.5% in 2012 – a gap that has only widened since the Lehman Brothers collapse in 2008.

Comedy is Comedy, Reality is Reality

Hanke concluded with a piece of wisdom from Nobelist Milton Friedman: "the minimum wage law is most properly described as a law saying employers must discriminate against people who have low skills. That’s what the law says."

I conclude with: Let's judge an argument based on merits, not on bias against the person stating it.

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About the AuthorMike "Mish" Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Mish also writes on economics in the world at Global Economic Analysis. He currently does fundraising to benefit ALS (Lou Gehrig's Disease) research, which claimed the life of his wife of 27 years, JoAnne, in May of 2012. When not writing about stocks or the economy Mish spends a great deal of time on photography and in the garden. He has over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com.

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